France has approved a digital services tax despite threats of reaction by the US, which claims that it unfairly hits American tech giants. About 30 companies will be liable to pay tax are mostly U.S. based tech giant including Alphabet, Apple, Facebook, Amazon, and Microsoft. Chinese, German, Spanish, and some British firms are going also affect.
The 3% tax will be applied to sales generated in France by multinational tech firms like Google and Facebook. Any digital firm that generates revenue of more than €750m (that is $850m or £670m) of which at least €25m is generated in France, would be liable to pay tax.
The French government has an issue that such firms based outside the country pay little or no tax. The US administration has ordered an inquiry for such steps and it might result in retaliatory tariffs.
For now, the tech giants are able to pay little or no corporate tax in countries where they do not have a physical presence. They claim a large part of their profits where they are headquartered.
The European Commission approximates that on traditional businesses is liable to pay a 23% tax on their profits within the European Union, while these big fishes of technology pool typically pay 8% to 9%.
France has always argued that taxes should be based on digital, not just physical existence. It announced its own tax on big digital firms last year after the European Union’s lengthy efforts.
An EU Taxation would require consensus among member countries, but Ireland, the Czech Republic, Sweden and Finland cast objections.
The US inquiry could pave the path for punitive tariffs, which Mr Trump has imposed on several occasions since taking office. Previous investigations started by Washington have covered European Union and Chinese trade practices.
If France is trying to pull hundreds of millions of euros from the accounts of American tech giants, the U.S. case might be, then why shouldn’t the United States make more dollars from what the French do in the US? France would share the destiny with China that has pushed itself in a trade war that has already exacerbated the relations between Beijing and Washington and has the possibility to grow even further.
